SEC Adopts Rule Exempting CPA Services from Municipal Adviser Registration

October 17, 2013

Many CPA services are excluded from the activities that would require registration as a municipal adviser under new rules approved by the U.S. Securities and Exchange Commission (SEC).

The SEC on September 18 voted unanimously to adopt the rules establishing permanent registration of municipal advisers, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

State and local governments that issue municipal bonds often rely on the expertise of municipal advisers to help them decide how and when to issue the securities and how to invest proceeds from the sales. The rules require municipal advisers to register with the SEC if they provide advice on the issuance of municipal securities, certain investment strategies, or municipal derivatives.

“In the wake of the financial crisis, many municipalities suffered significant losses from complex derivatives and other financial transactions, and their investors were left largely unprotected from these risks,” said SEC Chair Mary Jo White. “These rules set forth clear, workable requirements and guidance for municipal advisors and other market participants, which will provide needed protections for investors in the municipal securities markets.”

Under the regulations, which were scaled back from a previous proposal, CPAs would not be required to register as municipal advisers if they are providing audit or attest services, preparing financial statements, or issuing letters for underwriters, according to a specific exemption given by the SEC.

In a statement reacting to the SEC’s action, Barry Melancon, CPA, CGMA, president and CEO of the American Institute of CPAs (AICPA) commended the SEC for its flexibility on the issue. “Accountants providing audit and attestation services are already subject to layers of regulation that are intended to protect investors.”

Melancon also acknowledged the support of those members of Congress – Representatives Steve Stivers (R-Ohio), Steve Pearce (R-N.M.) and Gwen Moore (D-Wis.), in particular – who recognized the importance of exempting accountants from the municipal adviser definition by introducing legislation to that effect. “Their support at a time when the rule’s treatment of accountants was an open question was greatly appreciated,” he stated.